2006-12-24 04:00:00 PDT Bethlehem , West Bank -- This is the first Christmas season that Hamas has hosted in Bethlehem, and things are not looking good in the town where Jesus was born 2,000 years ago.

"This is the saddest Christmas. As you see, Manger Square is empty," said Mayor Victor Batarseh, a Roman Catholic mayor who was elected last year with support from Hamas. Only a statute requiring that the mayor and half the municipal council of Bethlehem must be Christians prevented Hamas and other Islamist groups from making a clean sweep of local government posts.

In the days leading up to Christmas, only a trickle of tourists visited the holy sites, half the shops were closed, and decorations were sparse. The foreign aid that once poured into Bethlehem has dried up, a victim of the international aid boycott imposed on the Palestinian Authority in March when the Hamas-led government took control of Gaza and the West Bank.

Like almost all public employees across the Palestinian territories, Batarseh and his workers have not been paid since the spring.

The Hamas government had promised to give Bethlehem $50,000 for the celebrations. Sheikh Raed Habib, a prominent Hamas supporter and the preacher at the Omar Ibn Khattab Mosque opposite the Church of the Nativity in Manger Square, approved of the allocation for Christmas despite the government's financial crisis.

"I am pleased that Hamas is helping to make Christmas," he said. "It is our duty to help with the decorations and congratulate our Christian brothers on their holiday. Muslims consider Jesus as one of the prophets, and we also celebrate his birth, but not as a major holiday."

Yet by Saturday, the promised money from the government had still not arrived. A municipal official said that even if it came, it would likely not be spent on Christmas lights. "We will pay the salaries -- that's more important," he said, on condition of anonymity.

Instead, the festive street decorations on the main road to Manger Square were donated by an Israeli-Arab Christian from the Galilee region of Northern Israel, who took shelter in Bethlehem with his family during the summer war to avoid the Katyusha rockets of Hezbollah.

Other Christmas lights were provided by local business owners, some of whom saw an opportunity to advertise their products. The Peace Center in Manger Square balked at displaying a banner wishing the people "Happy Christmas and Happy Eid from the Palestine Electric Corporation."

Before the Palestinian intifada, or uprising, burst out three months before Christmas 2000, about 50 buses a day made the 5-minute drive from nearby Jerusalem, bringing thousands of tourists who thronged the church, souvenir shops and local restaurants. These pilgrim dollars fueled a thriving trade in souvenirs fashioned from olivewood, mother-of-pearl and cheap silver. The town prospered.

But after six years of the intifada and Israeli military incursions, the tourists have disappeared, and Bethlehem's economy is in ruins. The town of 30,000 is now almost encircled by Israel's separation barrier, which has strangled Bethlehem's livelihood, cutting off the town from Jerusalem and deterring all but the most determined visitors.

Israel says it built the barrier to deter cross-border attacks, but Batarseh said it has transformed Bethlehem into "a big prison whose keys are in the hands of the occupier."

Only about 100,000 tourists have visited Bethlehem in 2006, compared to nearly 2 million annually before the intifada.

A fragile cease-fire in 2005 had encouraged some tourists to return, but this summer's war between Israel and Hezbollah in Lebanon discouraged most visitors. The eruption of deadly clashes between Fatah, the former ruling party, and Hamas two weeks ago was the final nail in the coffin.

"The political situation in Lebanon and the instability of politics in Palestine has affected tourism and pilgrimage," said Batarseh. "We have 65 percent unemployment and about 2,000 bedrooms in hotels that are empty."

Local leaders insisted that Bethlehem is safe. They said the kind of gunbattles that erupted in Gaza would not be repeated in the West Bank, where skirmishes between Hamas and Fatah have been fewer and less ferocious.

"What is happening in Gaza is alien to our culture, alien to our history, alien to our heritage as Palestinians," said Salah Tamari, the Fatah governor of the Bethlehem district. "We want Bethlehem to be a model. People in Bethlehem are aware of their mission. Bethlehem has a message of peace, for Palestinians first and then to humankind. Here we co-exist and live in harmony."

But for many Christians in Bethlehem, the new political domination of Hamas is only the latest phase in a process that has left them feeling isolated and vulnerable. Samir Qumsiyeh, owner of a local Christian TV station, has documented more than 90 incidents of anti-Christian violence carried out in the Bethlehem area in recent years and 140 cases in which Christian land has been taken over by what he describes as "Islamic mafia gangs."

George Rabie, a 22-year-old taxi driver and rapper from the neighboring town of Beit Jala, said he was beaten up two months ago by a group of Muslims from Hebron who reacted to the crucifix hanging from his rearview mirror. "It is a type of racism," he said. "We are a minority, so we are an easier target."

Farid Azizeh, an elderly restaurateur and former city councilman, was shot in the face and blinded after he got involved in a dispute with the Al-Aqsa Martyrs Brigades, the armed wing of Fatah. Last year, his 16-year-old granddaughter was abducted by her Muslim boyfriend and was rescued only after the intervention of the Latin Patriarch.

Among the few pilgrims in town just before Christmas was Archbishop of Canterbury Rowan Williams, who led a delegation of British church leaders to Bethlehem as a sign of solidarity. The clerics prayed in the Church of the Nativity along with Catholic, Greek Orthodox, Armenian and Syrian bishops.

"We are here to say in this so troubled, complex land, that justice and security is never something which one person claims at the expense of another, or one community at the expense of another," Williams said. "We are here to say that security for one is security for all, and for one to live under threat of occupation or of terror is a problem for all and a pain for all," he said.

The visit to Bethlehem by the British church leaders was "the most important visit this Christmas," said Mayor Batarseh. "This event makes us feel that we are not left alone, and there is somebody who cares about our plight."